Subbarao says inflation still high; bond yields rise

Reserve Bank of India (RBI) governor D Subbarao acknowledged on Thursday that inflation remains high, while also saying that curbing inflation remained the central bank's most important task.

Dr Subbarao added that the RBI has been able to curtail inflation to some extent in the last two years, in a speech at a village in Indore.

The comments on inflation being high sent benchmark 10-year bond yield up 3 basis points to 7.50 percent. RBI will aim to keep inflation low, while supporting growth, Dr Subbarao said.

RBI will take into account developments in inflation, growth, as well as the external situation while formulating its monetary policy review, due on July 30, he said.

Wholesale prices in June, India's key inflation measure, likely rose an annual 4.9 percent last month, a Reuters poll of 25 economists showed.

The index was up slightly from May's 4.7 percent reading, which was the lowest in over three years, and just below the 5 percent mark the central bank is perceived to be comfortable with.

On the rupee volatility Dr Subbarao, said it was difficult to say how long the external problems affecting the rupee would persist.

The rupee on Monday hit an all-time low on Monday at 61.21 against the US dollar. The rupee has been the worst performing Asian currency, falling almost 10 per cent in the last two months.

Dr Subbarao added that the country's current account deficit (CAD) remains high. India's current account deficit hit a record 4.8 percent in the last fiscal year and has been a key parameter for the RBI while setting monetary policy.